Weekend Headlines
Bloomberg:
- Euro Tremors Risk Market Respite on Spain-Italy, Banks. Europe’s political tremors risk spoiling the region’s market calm, with corruption allegations buffeting Spanish Premier Mariano Rajoy and Italy’s Silvio Berlusconi narrowing the front-runner’s lead as elections loom. Rajoy, facing opposition calls to resign amid contested reports about illegal payments, travels to Berlin today as euro- area leaders schedule a flurry of meetings this week ahead of a Feb. 7-8 European Union summit. Last week’s nationalization of the Netherlands’ fourth-largest bank and a 2.17 billion-euro ($3 billion) loss at Deutsche Bank AG underscore the fragile economic health in the region. “The euro crisis is not over,” German Finance Minister Wolfgang Schaeuble said Feb. 1 at the Munich Security Conference where fellow panelists included Deutsche Bank AG co-Chief Executive Officer Anshu Jain. Still, “we’re in a much better position than we were a year ago,” the minister said. A sluggish economy, uncertainty over the outcome of this month’s Italian election and Rajoy’s new troubles threaten to curtail the time won by politicians with the central-bank bond buying.
- Spain’s Rajoy Fails to Quell Graft Criticism Amid Calls to Quit. Spanish Prime Minister Mariano Rajoy’s assurance that allegations of illegal payments are false failed to contain criticism, with the opposition demanding he step down to restore faith in the political class. “Rajoy should resign to make way for another prime minister who can re-establish the strength, credibility and stability that Spain needs,” opposition leader Alfredo Perez Rubalcaba said during a televised press conference yesterday, a day after Rajoy had faced the public and vowed to carry on. “Spain needs a strong, credible, and trustworthy government.”
- Europe’s Banks Urged to Cut Down All Capital-Heavy Units. The president of the European Banking Federation is urging lenders in the region to reinvent themselves and discard the areas of their business that place too large a capital burden on their balance sheets. “Banks need to be more efficient, that’s very simple,” EBF President Christian Clausen said in an interview in Stockholm last week. “Everything that can be done will be done in terms of moving business.”
- Netanyahu Says Israel Must Stop a Nuclear-Armed Iran. Israeli Prime Minister Benjamin Netanyahu, nominated to form a coalition after winning the most Knesset seats in elections, said stopping Iran from building nuclear arms would be the government’s foremost challenge. “We have many missions to deal with,” Netanyahu said in Jerusalem after being chosen by President Shimon Peres. “But first we must maintain security, and the first task is to stop Iran from arming itself with nuclear weapons.”
- Hong Kong’s Debt Load Adds to Property Market Risks, HKMA Says. Hong Kong household debt levels close to record highs pose a risk as officials seek to limit property market overheating, said Norman Chan, the head of the city’s central bank. Debt is “near historic high levels,” Chan, the chief executive of the Hong Kong Monetary Authority, told lawmakers today, citing ratios of 58 percent to 59 percent of gross domestic product in the third and fourth quarters. In a housing and economic downturn, repayment may become more difficult, the official said. Overheating in the housing market is the biggest risk to financial stability, Chan said, echoing a warning in December from the International Monetary Fund. Home prices have doubled since the start of 2009, according to a weekly index compiled by Centaline Property Agency Ltd.
- Fed’s Bullard Urges Cutting QE Pace if Data Stay Strong. Federal Reserve Bank of St. Louis President James Bullard said he expects U.S. growth to gain enough momentum to let the central bank reduce the pace of asset purchases as early as the middle of the year. “We should think about tapering or adjusting the program,” Bullard said yesterday in an interview in Washington. “If you get some good data for a couple of months, maybe you’d say, ‘Okay, we go back to $75 billion per month instead of $85 billion or something like that.’”
- GM(GM) Plans 10-Weeks of Pickup Downtime as Inventories Rise. General Motors Co. (GM), which saw pickup inventories rise 24 percent last month, will take out 10 weeks of truck production as it prepares to introduce a redesigned Chevrolet Silverado and GMC Sierra in the second quarter. After finishing 2012 with a pickup inventory almost in line with targets, GM yesterday reported that the number of trucks it has on hand rose to a 117-day supply at the end of January from 80 a month earlier. The 10 down weeks are a total for GM’s three pickup plants to allow for the changeover, Jim Cain, a company spokesman, said yesterday in a telephone interview.
- Reid Says New Tax Revenue Vital in a Budget Deal. Senate Majority Leader Harry Reid drew a red line in the budget showdown with Republicans, saying Democrats will demand additional revenue as part of any deal to alter the mandatory spending cuts set to hit at the beginning of next month. The comments, made in an interview Sunday with ABC's "This Week," come as Senate Democrats weigh options for averting at least some of the March 1 cuts, known in Washington as the sequester. One Democratic proposal would seek to offset some of the roughly $85 billion in cuts this year with a combination of tax increases and spending cuts.
- Low Rates Force Companies to Pour Cash Into Pensions. Ford Motor Co.(F) expects to spend $5 billion this year shoring up its pension funds, almost as much as the auto maker spent last year building plants, buying equipment and developing new cars. The nation's second-largest auto maker is one of a who's who of U.S. companies pouring cash into pension plans now being battered by record low interest rates. Verizon Communications Inc.(VZ) contributed $1.7 billion to its pension plan in the fourth quarter and—highlighting companies' sensitivity to this issue—Boeing Co.(BA) now reports "core earnings" to separate out pension expenses.
- Bondholders Have a New Worry: LBOs. Corporate-bond investors are facing a new threat: private-equity firms launching debt-laden takeovers of companies in their portfolios. With buyouts back in vogue, fund managers specializing in highly rated, or investment-grade, bonds have been scrambling to avoid companies that might fall prey to private equity.
- Tech Titans Clash in 'Cloud'. Google Inc.(GOOG), Microsoft Corp.(MSFT) and Amazon.com Inc.(AMZN) have fought each other for dominance in mobile gadgets and Web searches. The latest front in their war is invisible: computing horsepower. Microsoft and Google are increasingly trying to unseat Amazon in the lucrative business of renting out computing storage and number-crunching to thousands of companies.
- Syria Rebels Blame Regime for Civilian Massacre. Syrian opposition activists and rebels said dozens of civilians were killed and wounded on Sunday in a missile attack by regime forces against a rebel-controlled neighborhood in the war-ravaged city of Aleppo. Video footage posted by activists on the Internet and purported to be of the attack's aftermath showed several residential buildings in a neighborhood identified as Ansari reduced to heaps of rubble and engulfed in smoke. Rescuers, many of them appearing to be rebel fighters by their dress and weapons, could be seen on the video frantically pulling out the dead and wounded, including children.
- U.K. to Give Regulators Powers to Split Up Banks. U.K. Treasury chief George Osborne on Monday will announce new powers for regulators to split up banks that flout rules designed to ring-fence retail banking from riskier investment-banking activity. In a wide-ranging speech on banking in Bournemouth, England, Mr. Osborne is expected to say the new powers are needed so that taxpayers will never again be on the hook when banks fail, as they were during the financial crisis.
- Dorothy Rabinowitz: Chuck Hagel's Defenseless Performance. Nothing could have harmed the nominee for secretary of defense more than his own confirmation answers.
Fox News:
Business Insider:- Report shows UN admitting solar activity may play significant role in global warming. The Earth has been getting warmer -- but how much of that heat is due to greenhouse gas emissions and how much is due to natural causes? A leaked report by a United Nations’ group dedicated to climate studies says that heat from the sun may play a larger role than previously thought.
- Former Navy SEAL Chris Kyle fatally shot at Texas shooting range. Chris Kyle, a former U.S. Navy SEAL credited with the largest number of confirmed kills, was one of two people fatally shot at a North Texas shooting range Saturday, Texas Highway Patrol confirmed to Fox News.
- Gasoline at Highest Price Ever for This Time of Year. U.S. drivers are now paying more to fill up their gas tanks than they ever have at this time of year. The national average price of retail gasoline posted its biggest one-day increase in 23 months on Friday, rising four cents to $3.46 a gallon, according to AAA. The average price has risen 13 cents -- a 4 percent increase -- in the past week.
- BofA(BAC): 'SELL-SIGNAL TRIGGERED'. (graph)
Reuters:
- Monte Paschi probe enters crucial week as Italy elections near. An investigation into possible fraud by Monte Paschi bank enters a crucial few days as magistrates question key witnesses in a scandal that has touched off a political fire storm just three weeks before Italy's elections.
- U.S. pension funds sue BlackRock(BLK), allege 'looting' at iShares. Two U.S. pension funds filed a lawsuit against BlackRock, alleging that the world's biggest asset manager had "looted" securities-lending revenues from iShares exchange-traded funds investors, and breached its fiduciary duties.
- Foxconn plans Chinese union vote. Foxconn, the contract manufacturer whose biggest customer is Apple, is preparing genuinely representative labour union elections in its factories in China for the first time, a powerful sign of the changes in the workshop of the world demanded by an increasingly restive workforce.
- IMF sees 140m jobs shortage in aging China as 'Lewis Point' hits. China’s vast reserve of cheap workers in the hinterland is vanishing at a vertiginous pace.
- Twin crises in Italy and Spain stalk markets as political unrest prevails. The escalating political crises in Italy and Spain are being watched with growing concern by bond investors, fearful that both countries could slide into paralysis and lose the crucial backing of the European Central Bank.
- Keeping this rickety union together calls for more than political will. The strength of the stockmarket this year has been partly due to relief that the euro crisis is apparently over. Yet the market is misguided.
- Tory Party suffers backlash on plans to legalise gay marriage as members resign in mass protest. David Cameron is facing a backlash over his support for gay marriage from within his own party as members desert Tory ranks in droves, it emerged today. Large numbers of activists are resigning or refusing to renew their membership in protest at the Government's plans to equalise marriage, MPs say. It is claimed those quitting range from a handful in some seats to dozens in others and more than a hundred in some.
- Germany in Talks to Send Nuclear Waste to U.S. The German government is negotiating with the American government to send radioactive waste to the U.S., citing a statement fro a German research ministry spokesperson.
Weekend Recommendations
Barron's:- Bullish commentary on (WMT), (SNDK) and (GLF).
- Bearish commentary on (HES).
- Asian indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 88.25 -1.75 basis points.
- FTSE-100 futures +.10%.
- S&P 500 futures -.03%.
- NASDAQ 100 futures -.11%.
Earnings of Note
Company/Estimate
- (GCI)/.88
- (SPG)/2.17
- (SYY)/.41
- (HUM)/1.07
- (CLX)/.81
- (EW)/.77
- (LNCR)/.61
- (GILD)/.48
- (HIG)/.28
- (YUM)/.82
- (APC)/.71
- (PPS)/.65
- (ADVS)/.27
- (GGP)/.29
- (LIFE)/1.11
- (RCL)/.06
- (MKL)/-2.81
9:45 am EST
- ISM New York for January is estimated to fall to 52.0 versus 54.3 in December.
- Factory Orders for December are estimated to rise +2.3% versus unch. in November.
- None of note
- The Eurozone PPI data, CBO budget review, China HSBC Services PMI and the RBA rate decision could also impact trading today.
1 comment:
I relate tht European political worries have now halted the global risk-on asset rally.
In overnight trading, the E-Mini S&P, ESH13.CME, is trading 0.15% lower as Bloomberg reports Spanish, Italian Bonds Plunge Amid Signs of Politcal Risk
Spanish and Italian 10-year securities fell for a second day as signs of political turmoil in Europe's so-called periphery damped demand for the debt of both nations.
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